Ground Rents Income Share Discussion Threads

[andy246] 17/8/2022 16:46

Calton, at the current price I think it's a buy.
- 5% dividend yield fully covered by the underlying ground rents income
- Share price is currently at a 40% discount to NAV, so it leaves some margin for any future impairments
- Continuation vote needs to happen before Aug-2023, so either the discount to NAV is greatly reduced by then, or the vote will fail and the company will be placed into runoff
- A short term catalyst could be the restarting of the buyback program, which was paused in Feb-2022 due to regulatory uncertainty. Since then, the share price has dropped another 25%

hxxp://pandora-capital.com/GRIO.html

[calton1] 04/6/2022 10:27

Hello Hello - what's going on with this company? Hold or sell- if so when?

[cousinit] 28/1/2021 16:36

There are very clear negatives here. Beetham Tower. Leasehold changes reducing future rental income and fees (fees seem to be around 20% of income and the leasehold changes proposed would seem to eliminate most/all of these.)

Not clear what the Schroders selling is driven by? Could this be IT savings scheme or is it a discretionary holding? Questor appears to have advised to hold given it previously recommended as a buy.

Weighted lease length is 343 years so rent should be protected for a while! I don't tend to produce discounted cash flows out quite that far. The leasehold changes seem broadly similar to those announced in early 2020 by the law commission so should be reflected somewhat in recent auctions and the valuer in the NAV?

Not sure when the above is fully reflected in the price? 40% discount certainly builds in quite a few negatives.

[spectoacc] 31/10/2019 20:41

Has taken me until Private Eye's arrival this morning to realise the reason for some of the rise is that leasehold reform got no mention whatsoever in the Queens Speech.

As there'll likely be another of those along after the GE, that gain may get reversed - and far, far more than reversed if the comrades gain power, whether solely or with the SNP.

[18bt] 25/10/2019 15:45

Fair enough - I continue to hold in my SIPP to give inflation protection over a lot of years into the future. I think the industry might consolidate once the legislation becomes clear (3-5 years????).

[spectoacc] 25/10/2019 10:14

Agree not fatal. Far more pressing bear points on GRIO:

1. The Manchester cladding court case, which they could walk away from (separate subsidiary) but which wouldn't look at all good
2. Uncovered divi (separate issue to having paid previous divis "illegally")
3. Govnt finally getting round to legislating on leasehold reform
4. Small size of the co/disproportionate fees/inability to grow when trading at (theoretical) discount to NAV

Bull points:

1. Some inflation protection - cheap compared to Linkers (for a reason..)
2. Asset management initiatives - fewer than with most property plays, but they're proving there's still some

[spectoacc] 22/10/2019 07:43

Not a rise I've been buying but yes - with Brexit ongoing, there's a distinct lack of Parliamentary time (or will) to get on with leasehold reforms.

Not sure what to make of this, other than that it's no surprise from GRIO:

"In addition, the Company also intends to regularise the position with respect to historic dividends, in relation to which the Company has recently become aware that such dividends were made otherwise than in accordance with the provisions of the Companies Act 2006. In order to put the potentially affected parties in the position which they were always intended to be, the Company is proposing to waive any and all claims which it has or may have in respect of either current or former shareholders, or current or former directors, in relation to such dividends."

I assume today's distributable reserves issue relates to not having the historic profits to be paying out divis - ie paying from capital?

But glad to see that, as a former shareholder, the company intends to waive any and all claims it has against me, in relation to the dividends it paid :) :)

[18bt] 22/10/2019 07:32

Some recovery from lows of c78p. Sensible asset management initiatives and quieter on the political fron for ground rents. ?gap fil to 94p next stop?

[spectoacc] 10/7/2019 11:45

hxxps://www.propertyindustryeye.com/labour-outlines-its-plans-for-leasehold-reform-as-criticism-continues-over-government-inaction/

[spectoacc] 02/7/2019 08:20

Not sure new house leasehold ban makes much difference to GRIO. But I see they're continuing to pay out of capital - c.1.6p earnings, c.2p divis (made a loss but only due to yet another revaluation downwards of portfolio).

No mention I could see of previous legal problems re Manc block?

Still feels a bargepole stock to me, but it has a price - based on 1.6p for Half Year extrapolated up to 3.2p, perhaps 60p/share? Costs will be eating into it now they can't realistically expand.

Edit - sorry, the Half Year Report did talk about the Manc legal problems further down:

"In January 2019 a High Court judgment was handed down against North West Ground Rents Limited ('NWGR'), a wholly owned subsidiary of the Company. The damages associated with this judgment have yet to be determined in a separate hearing, for which a date has not yet been set.

NWGR continues to evaluate what the next actions and consequences of the judgment may be. NWGR is reliant on the financial support of the Company to finance further legal action and to comply with the judgment. The Company continues to review its own obligations in regard to NWGR and NWGR's obligations under the judgment."

And

"Due to the legal action and uncertainty of its outcome in September 2018, the value of the Building was reduced to GBP100,000 in the accounts of NWGR. NWGR continues to pursue Carillion's insurers and sub-contractors under collateral warranties. NWGR has no external third-party debt and is ring-fenced from the wider group.

During the period, NWGR incurred costs of approximately GBP1.1 million in relation to the judgment and will incur further sums as part of seeking to comply with the judgment timetable. NWGR is reliant on the financial support of the Company as its parent to finance further legal action and any decision on future funding requests will have appropriate regard to shareholders interests together with the interest of other stakeholders."


Which sounds to me like they might attempt to walk away from NWGR! But not before having incurred £1.1m - and more - in costs. An utter fiasco for an Investment Trust, and are any similar grenades lurking elsewhere in the portfolio? Not what shareholders signed up to when they invested in GRIO.

Changing my target price to "below 50p, bordering on uninvestable".

[cwa1] 09/5/2019 20:58

Agreed, not cheap enough for me yet, tho', like you, not sure what price would tempt me...

[spectoacc] 09/5/2019 20:56

@CWA1 - also a non-holder, tho not so content after taking a bath on them! Wonder at what price they'd be a long - divi nothing to write home about and wasn't even covered. 80p? 60p? Everything has its price, but GRIO not got to it yet :)

[cwa1] 09/5/2019 20:54

A reasonably content non-holder here!

[spectoacc] 09/5/2019 20:53

Struggle to see how this won't just wither away - are they still paying the divi partially out of capital? Does the NAV reflect the court judgement against them? Where are we with legislation?

Costs need to be cut too - chances of them growing into the cost base now seem remote.

[spectoacc] 31/3/2019 08:35

Investor Report a fortnight ago made for pretty grim reading too - with not much more detail on the legal case: